Personal income tax: liability to tax.

Personal income tax is imposed on income of Russian residents and individuals who have sources of income in Russia. Individuals are deemed residents of Russia, for tax purposes, if they are present within the Russian Federation for at least 183 days in the calendar year, in other words from January 1 to December 31. In this case they are subject to Russian tax on their worldwide income. Non-residents pay tax on the Russian-source income only.

Russian source income is deemed to be any income from activities carried out in Russia and passive income which originates in Russia, for instance:

- dividends and interest, paid by a Russian company or individual entrepreneur, or by a foreign entity in relation to its permanent establishment in Russia;
- insurance payments from a Russian company or a foreign entity in relation to its permanent establishment in Russia;
- royalties and copyright income;
- rent and similar income from property in Russia;
- income from disbursement of real estate, stocks, shares, rights of a claim to a Russian entity, other property and property rights;
- salary and other labour payments for work or services in Russia, including payments to directors and members of a management body of a resident corporation regardless of the place of their residence or management office.

Where an individual is deemed to be a resident of two or more countries according to their unilateral laws, then his or her status is determined by the relevant double tax treaty. Most treaties concluded by Russia comply with the OECD model. Accordingly, the tax status of an individual is determined by the application of the following principles, as contained in the double tax treaty:

- place of permanent home: individuals will be deemed to be residents of the country in which they have a permanent home available.
- centre of vital interests: if a permanent home is available in both countries, an individual will be deemed to be a resident of the country with which personal and economic relations are closer.
- place of habitual abode: if the country in which individuals have their centre of vital interests cannot be determined, or if they have no permanent home available in either country, they are deemed to be a resident only of the country in which they have an habitual abode.
- nationality: if individuals have a habitual abode in both countries or in neither of them, they are deemed to be a resident of the country of which they are a national.

In cases where these principles do not provide adequate guidelines, the authorities of the countries may settle the question by mutual agreement.